Announcing the decision to authorise the use of military force, Nato Secretary General Javier Solana said: "We have taken this decision after a thorough review of the situation in Kosovo. Yugoslavia has still not complied with UN resolution 1199 in a way that can be verified."

Thousands of Kosovar Albanians have been left homeless

But he added: "Even at this last hour, I believe that diplomacy can succeed and the use of military force can be avoided. but the responsibility lies on the shoulders of President Milosevic he knows what he has to do."

Mr Solana said the decision had been taken on the basis of a briefing by US special envoy to the Balkans Richard Holbrooke, who had reported progress due to Nato pressure during his days of shuttle diplomacy between Brussels and Belgrade.

The Yugoslav ambassador to the UN, Vladislav Jovanovic, said Nato had disregarded the authority of the UN Security Council.

"[Nato] has decided to act against a country which defends itself against terrorism and a separatist attempt to wrench an integral part of our territory out of Serbia and Yugoslavia," he said.

Immediately after the Nato announcement, President Clinton confirmed recent speculation that President Milosevic has indicated during the course of negotiations that he will meet international demands on Kosovo.

"Faced with a solid international front, President Milosevic has made a series of commitments," Mr Clinton told a news conference in New York.

He said the Yugoslav president had agreed to withdraw Serb forces from Kosovo, and to allow 2,000 international observers to verify compliance on the ground. He said Mr Milosevic had also agreed to a timetable for discussions on autonomy for Kosovo.

"If achieved, and that is a very big if, these could achieve the international community's objectives."

But he warned: "Commitments are not compliance. Balkan graveyards are filled with President Milosevic's broken promises."

UN demands to Yugoslavia

The UN demands which Nato says Belgrade must meet in order to avoid military action are as follows:

Serbian attacks in Kosovo must stop.

Mr Milosevic's forces in Kosovo must return to barracks.

Peace talks must start with ethnic Albanians.

Refugees must be allowed to return to their homes.

Aid agencies must be given full access to Kosovo.

Yugoslavia must co-operate with the War Crimes Tribunal in The Hague.

Holbrooke back to Belgrade

The threat of military action strengthens Richard Holbrooke's negotiating position

Immediately after briefing Nato ambassadors, Mr Holbrooke left once again for Belgrade, where his job will include finalising certain unresolved details of the agreement with President Milosevic.

These include how Belgrade's compliance with the settlement would be monitored. This task will probably be entrusted to civilians of the Organisation for Security and Cooperation in Europe, backed up by Nato aircraft.

Correspondents say Nato's decision to hold fire for 96 hours - twice as long as was earlier suggested - recognised gains made by Mr Holbrooke during the past few days of talks with President Milosevic, and the possibility of a peaceful settlement in the coming days.

Mr Holbrooke's hand will be strengthened, however, by Nato's decision to go ahead with the activation order.

Countdown

The activation order is in effect a countdown to possible military action in four days' time. The order:

Brings the forces of the Nato allies under the command of Nato supreme commander General Wesley Clark;

Deploys Nato warplanes to Italy;

Allows for a limited programme of missile strikes.

If military action is to go any further than this, the allies will have to take a further political decision.

Meanwhile US Air Force B52 bombers have arrived in the UK for possible deployment in the event of air strikes on Serbia.

The BBC correspondent in Serbia reports that civilians there are preparing for war. Local authorities have been testing air-raid sirens and drawing up lists of air-raid shelters, and citizens are forming crisis committees and stockpiling food.